Joining the likes of Apple and Google, Microsoft is now also rumored to be making a 7-inch version of its first homemade tablet -- the Surface.

According to a recent report from Reuters, Microsoft is in the midst of creating a whole new batch of Surface tablets, which includes a 7-inch version.

The 7-inch tablet is expected to go into mass production later this year.

Microsoft, which released its first Surface tablet on October 26, 2012, hasn't seen the sales success it expected. Last month, a Bloomberg source anonymously revealed that Microsoft had sold 1.5 million Surface tablets at that point. More specifically, the company had sold a little over a million Surface with Windows RT tablets (features the Windows RT version of Windows 8 specifically for ARM processors) and about 400,000 Surface with Windows Pro tablets (features the full version of Windows 8 and an Intel Core i5 processor).

Microsoft launched Surface with Windows RT in October and Surface with Windows 8 Pro in February.

Microsoft likely wants to run with the big boys like Apple and Google in the tablet sector, and both have already released 7-inch tablets (which tend to be more affordable for consumers). Google's 7-inch Nexus 7 tablet was a hit at only $200 with a load of impressive features, and Apple released its 7-inch iPad mini for a little over $300 last November.

However, Microsoft may want to steer clear of releasing any more Surface tablets with Windows RT, since the operating system has largely been a bust. RT-powered tablets have dropped significantly in price in some cases due to lack of consumer demand, and many hardware makers are looking to just clear the dead weight out of their inventory.

Even analysts believe Windows RT will, at some point, just fade away.

"I think you're seeing discounting based on user demand. I never thought RT was going to be that successful," said Jack Gold, principal analyst at J. Gold Associates. "RT will fade away over time. It's not a full Windows 8 experience. That said, why wouldn't I spend more and get a full Pro version of the device?"

The nature of Microsoft's blunder in it's strategic response to the rise of mobile devices is perfectly exposed by it's recent priorities. Faced with exploding sales for powerful mobile computing devices it should have prioritised producing a well designed version of Office for iOS and Android with a top quality touch interface and combined that with an update for Windows using the familiar UI (instead of the pointlessly challenging Windows 8 interface) with clever integration features so users of the iOS and Android version of Office could work seamlessly with their Windows PCs and Macs. That way Microsoft might have been able (assuming it could actually produce a top quality touch version of Office) to become the key vendor of productivity software in the mobile space which would have brought with it all sorts of strategic benefits and opportunities.

If Microsoft had done that in a timely way, say a year ago, they could by now have been on the way to being a major software player in the mobile device arena instead of an irrelevance. It's the obsession with focussing on defending Windows that is crippling the company's strategic decision making. Microsoft did not need to be a major OS vendor on mobile to succeed as a software company in the mobile space.

Microsoft needs to wake up to the fact that they will never be a major OS player on mobile devices. That game is lost forever. But there is still much to play for, however the clock is ticking and unless they move fast quite soon all of Microsoft's software empire will be essentially irrelevant in the vast new mobile device markets.

The world's largest software company missed the emergence of world's largest new software market and ended up with no presence in it. Shockingly incompetent.